Reduction in interest rates: more favourable investment environment for businesses
Breaking point in European monetary policy – today’s European Central Bank (ECB) decision to cut the deposit interest rate by 25 basis points to 3.75% has started a new cycle of rate reductions, which we will experience in the coming years and which will encourage a decrease in the EURIBOR rate.
“For Lithuanian businesses, this means a more favourable investment environment and more active domestic consumption, which have been burdened by the high-interest-rate environment in recent years. Lower rates will stimulate gross domestic product (GDP) growth; however, the impact of the rate cuts is already included in the economic growth forecasts,” says Ilkka Saksa, Senior Strategist at OP Financial Group.
Our bank’s economists predict that this year the ECB will cut base interest rates two more times – in September and December, with further reductions expected next year. Nevertheless, these forecasts depend on the pace of inflation slowing, and the outlook for monetary policy remains uncertain.